Case Study
Learning Outcomes
This case study must be presented as anindividual effort. The case study requires individual research. The course manual and set texts are intended to be the starting point of the research. It is expected the student will survey the relevant literature, including decided cases, and select appropriate additional resources.
The case study is designed to incorporate uncertainty. The student is expected to develop a piece of work which is written advice for their client. It must therefore identify the facts and issues presented by each aspect of the case study, identify and apply the relevant legislation and/or case law, come to a conclusion and make a recommendation to the client.
Context:
This assessment assesses your research skills, your ability to synthesise an original piece of work to specific content requirements and your ability to produce a comprehensible piece of advice which addressing the client's needs.
It also assesses your written communication skills.The ability to deliver to a brief is an essential skill in the workplace.Clients may well approach advisors seeking a combination of specific information needs and advice on the tax implications of a particular arrangementin the Australian tax jurisdiction. It is therefore important to be able to identify all the issues presented by an arrangement and to think about the potential consequences of different approaches to addressing the client's needs.
Instructions:
Your case study needs to identify and discuss the tax implications of the various issues raised. In order to produce your case study, you will need to review relevant case and legislation. The subject manual and set texts are starting points only, you will be expected to use these initial materials to identify potential useful resources. You will then need to review your selected resources to see if they value add to your analysis.
Your case study is not just a list of answers. Your reasons for your conclusions and recommendations must be based on your research into the relevant cases and legislation.
Assignment
Question 1
With reference to the UK Australia Double Tax Agreement explain:
a) the meaning of the term Permanent Establishment.
b) how the business profits of an enterprise incorporated in the UK are taxed in Australia.
c) whether contracts made through an independent agent would result in a Permanent Establishment
Question 2
Andrew McSwington is a highly regarded MLB prospect. During the American off season he first travelled to Mexico to play in the Fall League for 2 months and then decides to come to Australia and play in the Australian Baseball League in December, January and February to play for the Adelaide Chomp. He signs the contract stipulating he is to be paid $45 000 for the 3 months in Adelaide and joins the team shortly after. The contract states he is to be paid monthly into a bank account in the Turks and Caicos Islands
Andrew is impressed with Australia and decides to purchase a home unit at Glenelg. His plan is to use it as a base during the home and away series and rent it out for the remainder of the income year.
Discuss:
- Whether Andrew is liable for taxation on the $45000 for his baseball skills
- Whether Andrew is liable for tax on the rental income received during the balance of the year
Question 3
Explain how the principle from the Myer Emporium v FCT case is used to determine whether a receipt is assessable as ordinary income or as a capital gain. Illustrate the principle with reference to relevant case law.
Question 4
a) With reference toSoftwood Pulp and Paper v FCT 1976 explain whether a deduction is available for interest paid on a loan during the preparatory stages of a business.
In your opinion when would a business advance from a preparatory stage?
b) With reference to Ronpibon Tin NL v. Federal Commissioner of Taxation (1949) 78 CLR 47 explain the importance of the ‘incidental and relevant test" in determining whether interest paid on loans in deductible.
c) With reference to FC of T v. Brown 99 ATC 4600; (1999) 43 ATR 1 explain whether interest paid on loans can be deductible after business activities have stopped
Question 5
With reference to at least three (3) different sources and the indicators of good tax policy explain whether or not you think the 50% general discount for individuals on the disposal of CGT assets is good tax policy.